The law generally assumes that parties engage in a civil lawsuit will not transfer assets as a way of protecting themselves against a future monetary award. And in fact, such transactions may be deemed illegitimate if uncovered after the fact. So what is a creditor to do if he suspects such transfers as he struggles to collect an outstanding monetary award?
Judgment Collectors is a Utah collection agency based in Salt Lake City. They help clients collect outstanding judgments in nearly a dozen states. They say that the first thing a creditor must do is prove that assets have been transferred. And in order to do so, he needs to find such assets.
A case in point involves a debtor that Judgment Collectors says insisted he did not have the financial resources to pay. They ran a search of property records and discovered the debtor owned real estate in a neighboring county. The property gave Judgment Collectors leverage to convince the debtor to pay up.
It’s All About Investigation
Revealing asset transfers is all about investigation. Indeed, one of the reasons so many judgment creditors fail to collect in-house is a lack of investigative tools and skill. Agencies like Judgment Collectors use advanced techniques and a mix of document analysis, public records, and relationship mapping to uncover asset transfers to friends, relatives, and business associates.
Follow the Money
One of the first things a skilled investigator will do is thoroughly comb through bank and credit card statements. An investigator is looking for regular payments, checks, and large transfers to third parties. Third parties can be anyone from spouses to extended family members to companies.
Transaction dates are compared to various civil litigation milestones. Any transaction taking place at about the same time needs a given milestone could be suspect if there is no known purpose behind it.
In addition to bank and credit card statements, investigators will scour financial statements, loan applications, and tax returns in search of red flags. References to gifts are something of interest. Ditto for shareholder loans and related-party transactions.
Public Records and Business Filings
All real estate transactions and most business filings are a matter of public record. For example, if a judgment debtor transferred a piece of real estate to a company that he had a financial interest in, that transaction would be recorded by the county clerk. This is what makes property records so valuable. A person cannot transfer a piece of real estate without leaving a paper trail behind.
Business filings can be equally valuable. Investigators dig into business license records. They look at partnership records, corporate filings, and other sorts of documents looking for connections. Investigators look at registered agents and company officers. They look for documents with common addresses.
Relationship Mapping
A skilled investigator leaves no stone unturned. Therefore, relationship mapping is another part of the equation. An investigator builds a list of close relatives, associates, and even romantic partners. All the names on that list are cross-referenced against financial records. Clusters of payments showing up around the same time as a litigation milestone are suspect.
There is still more a judgment creditor or investigator can look at in hopes of uncovering asset transfers. The one thing they all have in common is timing. An investigation should reveal links between transactions and litigation milestones. All such links are red flags that suggest further investigation.
It is common for defendants in civil litigation to transfer assets in order to protect them against a monetary award. If such transactions can be uncovered, they can often be reversed by the court.
